Trade regulations, including tariffs, are not solely governmental concerns; they significantly affect businesses, particularly those involved in cross-border sales or operating under trademark licensing agreements.
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What is a Tariff?
A tariff is a tax imposed by a government on imported goods. These taxes are typically used to promote domestic products by making imported goods more expensive. While tariffs are primarily economic tools, they can also have significant effects on companies that own intellectual property (IP), such as trademarks, patents, and copyrights.
Key Considerations
Counterfeit Products
Tariffs can increase the price of genuine goods, leading some consumers to seek less expensive alternatives. This demand can create a market for counterfeit products, which often do not meet the same standards as the original versions, potentially affecting customer satisfaction and brand reputation, as they dilute the perceived value and authenticity of the original products. Continuous dilution hinders brand growth and market position.
Trademark Licensing Challenges
Trademark licensing involves granting another party the right to use a brand name or logo in exchange for royalties, typically based on product sales. This arrangement allows businesses to expand their reach by leveraging established brand recognition. When tariffs affect product pricing or sales volume, licensees may find it difficult to maintain profitability or pay royalties, complicating the fulfillment of licensing agreements.
IP Protection Protection at Borders
Tariffs may influence how customs agencies allocate resources and prioritize the inspections of shipments. Increased attention to high-tariff goods can reduce scrutiny of other items, including counterfeit products. As a result, unauthorized goods may have a higher chance of entering the market undetected.
Strategic Responses
Check Your Contracts
Consider including clauses in your contracts that account for tariff-related changes, such as alternative royalty calculations or contingency plans for shifting market conditions.
Protect Your IP Everywhere You Do Business
If you relocate manufacturing to a new country to offset tariff costs, it is important to register your trademarks and patents in that jurisdiction to ensure continued protection.
Implement Counterfeit Measures
Utilizing tools such as tracking tools and unique techniques, such as unique packaging, product serialization, and cooperation with customs authorities can help identify and stop counterfeit goods before they reach the market.
Bottom Line
Tariffs are more than just a matter of trade policy; they can influence how intellectual property is managed and protected. By understanding these connections and preparing accordingly, businesses can better safeguard their assets.